Cheap and cheerful or value for money?
Posted on Friday, September 29, 2017 by Venn Group — No comments
For years negotiation has been one of the key ingredients in purchasing. We negotiate on a regular (if not daily) basis without even noticing or acknowledging it. With the kids when they need to go to bed, with a tradesman who once again has disappointed you and not met your expectations, or your other half when trying to determine if skiing or beach holiday would be more fulfilling at this time of the year!
It seems simple and straightforward, but somehow more complex when it is your daily job. The current economic climate dictates the trends for the skills of employees and negotiation is one that is highly sought and valued.
I have always been a great believer in four fundamental principles of negotiation: Know what you want – have your objectives and know the absolute maximum that you are prepared to give away. Do your research, investigate or do anything that is required to gain leverage; be assertive (or in my case, very assertive) and always have a backup plan.
You can call me old school, but I must admit these have served me well. The feeling of striking a good deal is already a debt of gratitude itself.
The desired outcome is not only a great personal accomplishment and motivation for the future endeavours, but by reducing the costs you have added value to the business and contributed to company’s success.
Sadly my recent experience is a testimony for the best price not always being an equivalent for a best deal. “Did you know we can reduce your costs?” “Are you aware that we can provide the same service at a lower cost?” These marketing clichés often lead us to believe that by driving down the costs we actually gain advantage and although in many cases these two are just different sides of the same coin, the differences between them can also be profound.
Not deviating from the foundations set previously, I have therefore made a pledge to always ask myself a few additional questions before entering/concluding any negotiation process in the future.
Am I applying the correct negotiation method/strategy?
There is never one negotiating strategy to fit every need. Let’s agree that cheap and cheerful would be a satisfactory outcome when you are purchasing a one-off product. If you have negotiated the price of a TV to £200 (that has originally been priced at £500) you have a superb result.
Your negotiation strategy will always be determined by what you are negotiating on. Is it an office product or a service? Is it an equipment that will require a regular maintenance? Maybe it’s the professional advice or you require an interim manager to fill the skill gap in your company? You would never apply the same tactics when negotiating the services that your business will rely on for the next five years and a Christmas Cards’ order.
Whilst matching the best strategy to the particular situation your priorities shift and low price might no longer take precedence. We are all committed to reducing the costs for the business; the emphasis is in doing it the right way.
What I am ready to sacrifice for getting it at the lower cost? (Indirect costs implication)
Scrutinizing every aspect of the deal until you are completely satisfied is a norm. Regardless of the time invested and all the knowledge or expertise advice applied, the unforeseen situations or problems are most likely to occur.
Our time is money and we need to ensure we spend it wisely. How long will your team be processing the invoices if they cannot be consolidated? Will you have a one point contact who could just deal with all problems that crop up? All these practicalities are generally part of your agreement, however there are always exceptions, so be prepared.
If low cost has been one of your priorities, it has probably come with some sacrifices or even loss.
Let it be the amount of time you will spend on the phone trying to chase your supplier or your interim placement who does not meet the expectations because you have paid a fraction of the market rate for them.
If I win, do they necessarily have to lose?
This is not a tricky question; however the answer to it can somehow be ambiguous.
Yes, there is always just one winner and the aim of negotiation is never to satisfy both parties fully. I will take advantage of any situation and will make it work to my benefit. However, even though you have left the negotiation process as a winner, you will need to build a long term relationship with your new supplier and in my opinion this might often become a priority.
Will they be able to offer you flexibility that you need when they have cut their costs to the bare minimum to accommodate you with the deal that you required?
If you have an urgent requirement will they prioritise you amongst other clients? It is unlikely that they will if it is not financially feasible for them, at the end of the day any business must be profitable. There is always just one winner; however the other party should come away with satisfactory outcome and be able to claim some benefits.
The list of these questions is not absolute. We adapt to the situations and are resilient to changes.
Ironically the cliché phrase “If it looks too good to be true, it probably is” generally proves to be genuine and none of us want to experience that troublesome aftertaste.
Maybe these points are worth considering during your next negotiation process?
What are your best tips for successful negotiation?
Irma Dzikaite, Venn Group